This site uses cookies to store information on your computer. Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. Read our privacy policy to learn more.

Latest Stories

Swinging for the Fences: Jonathan Mariner Interview

Jonathan Mariner sports a shiny 1997 World Series championship ring
on his right hand—a trophy from the nine years he spent with the
Florida Marlins. Mariner got into the business of professional sports
by answering the fledgling baseball club’s CFO wanted ad in 1991. He
went on to become executive vice president, finance, and CFO of Major
League Baseball, where he oversees, among other things, the league’s
central office budgeting, financial reporting and $1.5 billion
leaguewide credit facility. A Harvard MBA, Mariner says his pro sports
post may be high-profile, but at its core, it’s a nuts-and-bolts
accounting job.

He spoke recently with the JofA about his career path, his
fixation with becoming a CPA and the economics of baseball. What
follow are excerpts from that conversation.

Editor's Note

“Corner Office
Conversations” is an occasional series of personal talks with
high-level leaders in accounting and finance. Read bonus content
of this Q&A here .

JofA: What were some of the early influences that set you off on
the path to Harvard Business School and into the business world?

Mariner: I grew up in Norfolk, Va., and
went to public schools. My parents didn’t go to college. Norfolk is a
Navy town, and they worked for the Navy. I grew up not really knowing
what I wanted to do. I considered at one point being an architect—my
uncle’s an architect—so I saw that and I thought that looks kind of
neat. I was always good at math so I drifted toward engineering. Then
I met Bill Aiken. Bill is a family friend who lives here in New York
City who was one of the early leaders of the National Association of
Black Accountants. And Bill was talking about the accountancy
profession. He mentioned at the time, this was back in the early ’70s,
there were only about 130 black CPAs in the entire country. And as a
young kid looking for career options and looking for role models, I
saw Bill Aiken and thought, “That’s kind of a neat profession.” I
thought that would be kind of a nice way to build upon the whole math
area that I really, really loved.

I spent my first two years at the Naval Academy. I ended up going
there because I had a full scholarship. I had an older sister who was
going to a private college, and my parents were kind of struggling,
and I thought this would be a great way to take the burden off them. I
got there expecting to be a management major thinking that would get
me to where I wanted to be, and the biggest reason I left was I didn’t
think I’d get to be a CPA soon enough, given the military obligation I
would have faced had I stayed longer than two years. And so it really
drove my decision to transfer to the University of Virginia and major
in accounting. So I always had this fixation to be a CPA. I am a
dyed-in-the-wool accountant.

JofA: What prompted you to pursue your CPA, and has it made a
difference in your career?

Mariner: Strategically, I thought it
would be a great place to really build my background. And I’ve never
regretted it. I remember I took this one course at Harvard. There was
a textbook that we used called Accounting: The Language of
Business . And I thought that perfectly captured how I viewed
the world of accounting. It is a language; it’s how you communicate,
how you keep score in business. And I thought no matter how one
pursues their career in the finance world, if you don’t know
accounting, it’s very difficult to really be able to excel, in my
view, in a way that can make a difference.

For all the Wall Street gurus out there, especially those starting
out in their career, if you’re doing a big M&A deal, you’re going
to start with some of the advanced accounting topics. How are we going
to structure this merger? How does the thing look when you consolidate
it? What’s on the balance sheet? What does the P&L look like?
What’s the consolidated earnings per share going to be? Real
sexy-sounding things from a financial point of view, but the
accounting rules dictate how you do it.

JofA: One of your responsibilities is giving updates at team
owners’ meetings about leaguewide finances. From 50,000 feet, how
is the financial picture?

Mariner: Things are good these days. The
league’s finances are fairly straightforward: we, at the league
office, are similar to a cost center. We cover our costs by allocating
a portion of the national TV contract revenue to our expenses. We
remit the remainder of those proceeds to the clubs, which shows up on
their books as one of several “national” revenue sources along with
revenue from licensing of team names, logos and trademarks, et cetera.

The clubs’ finances are based on their individual local market
activities—local radio, TV and cable revenue; stadium revenue from
gate receipts, suites, parking and concessions; stadium signage;
sponsorships, et cetera. Their bottom line is determined by offsetting
these revenues by their locally incurred expenses for items such as
player payroll, stadium operations, player development expenses and
marketing expenses.

When I came to this office six years ago, we were in the midst
of renegotiating our collective bargaining agreement, our CBA, with
the players association. One of the bigger challenges that we had to
face back then was the fact that the business model wasn’t working. It
was simply difficult for a team to make money given how we were
operating. Three things came out of that CBA that really made a
difference.

We moved to a model with enhanced revenue sharing, where large
market clubs give more money to the clubs that don’t have as much,
aren’t in as large markets.

Since we have been, unlike the NFL, unsuccessful in getting a
salary cap in place, we instead were able to implement with this 2002
CBA a luxury tax or I guess it’s technically called a competitive
balance tax. I call it the speed bump.

It basically says there are no spending limits, but if you spend
over a certain payroll dollar amount, you pay a tax on the amount that
exceeds the spending threshold. And each year that you exceed that
threshold the tax rate goes up. The highest rate is 40%. So it’s a
pretty high premium to pay for the extra dollars over the limit. It
tended to create what we call “salary drag.” It slowed the rate of
growth of payroll, which gave us a chance to improve profitability and
improve our clubs’ P&Ls.

But the last thing was the most important tool and this is what
I spent, during my early years here, the most time working on—our debt
service rule (DSR). It’s basically a club debt limitation rule that is
tied to the P&L rather than the balance sheet. The old rule was an
asset-to-liabilities ratio. This rule is an EBITDA-based ratio that
really puts more focus on the P&L. So in implementing that rule,
one of the key roles that I was able to play with my staff was to
provide the underlying framework and reporting tools for the model we
have today.

We require each club to provide the commissioner’s office with a
three-year forecast including a P&L, balance sheet and statement
of cash flow all tied out on a forecast basis. We use these forecasts
to see how clubs project whether they will be, or remain, in
compliance with the DSR, how they manage their balance sheet within
the debt rules and how that affects overall industry profitability.

On the scorecard back in 2002—and Commissioner [Bud] Selig loves
to talk about this with great pride now that we’ve turned the
corner—our industry consolidated EBITDA was approximately negative
$480 million among the 30 clubs. In fact, we only had about three
clubs with positive EBITDA back then.

As of the end of 2007, we were at about $520 million positive
EBITDA. So that’s a favorable swing of about $1 billion in five years.

JofA: What impact will the human growth hormone issue have on the
league’s finances?

Mariner: You know it’s interesting, this
has been an ongoing issue for us, and pardon my huge bias/soapbox
comment here, but we think unfairly there’s been much more focus on
us. Some will argue that we deserve some of what has happened, and I
won’t dispute that, but human growth hormone is a problem that affects
all sports.

It has been an ongoing issue for us in particular goingback to
2003. But we’ve also had record attendance every year for the last
four years including last year. We like to think on a positive level
it’s because our game has become more competitive—we’ve got more
competitive ticket prices, more teams are in contention later into the
season, so fans go to games for longer periods of time throughout the
season versus saying, “My team’s out. I’m going to stop going.”

We like to think that this issue hasn’t really jaded our fans to
the point that they don’t want to come. We haven’t seen it yet at the
turnstile. We actually dealt with it from a testing perspective in
2003—we began testing at the minor league level in 1999— and we
continue to step up the penalties for steroid use. Because we think we
dealt with the bigger issue that we can control, we don’t see this as
an issue going forward no more than to the extent that it will affect
almost any other sport.

JofA: What are your priorities for 2008?

Mariner: A lot of the goals are
internally generated. They’re more focused on operational efficiency
within our own department, a shift from the more global issues that
emanated from the 2002 CBA. This year we’re going to do boring
stuff—we want to change the chart of accounts to provide better
reporting to our operating units. We just put in, and we’re going to
do more with this, an online bill pay system, where vendors submit
their invoices to us electronically and they can keep track of them
online. We want to pay everything electronically, reduce the amount of
paper flow.

JofA: What lessons did you learn during your time with [businessman
and then-Florida Marlins owner] Wayne Huizenga?

Mariner: First of all, I call myself the
ultimate Wayne Huizenga apologist. I remember saying to him, “You
know, Wayne, they teach at Harvard Business School what you do day to
day as a CEO and entrepreneur.” In terms of his management style, his
approach—it’s textbook. And here’s a guy that didn’t finish college.
He is the ultimate entrepreneur and, to me, the ultimate
motivator/manager. He’s extremely loyal to his people, something I’ve
learned and I try to practice. He cares about the little things,
especially those things that affect his customers, his clients, which
is why he’s been so successful.

But at the same time he gives his managers the autonomy to get
the job done. He allowed people on the Marlins staff to make mistakes.
He didn’t want to see it twice or three times, but his approach was,
“You mess up—hey it didn’t work. We tried.”

Those are things that I learned from him that I still carry
today and that I pass along to others as well.

JofA: What advice would you give young CPAs interested in becoming
CFOs?

Mariner: I think the accounting
background, the CPA background, is critical. I’ll put it this way—an
MBA coming into this job couldn’t be anywhere near as effective as
someone who has been a CPA, because at the very end of the day, it’s
an accounting-driven job. The things that I deal with, that club CFOs
deal with—for example, selling the Washington Nationals and keeping
track of how we account for the sale on our books and how it impacted
the individual clubs that ultimately owned that franchise—all of those
are nuts-and-bolts accounting issues.

But having the broader business background, an MBA in addition
to a CPA, I think is a plus because there is a business element to
what we do in professional sports.

JofA: You were Major League Baseball’s first African-American senior
vice president. Talk about how that was significant for you.

Mariner: Interesting—it wasn’t—partly
because I had grown up in a world where you could almost always attach
“the first” or “only” or “one of the few” to my title. At the end of
the day, you have to produce. Perhaps the expectations are higher, but
I’m used to learning pretty fast anyway. And so being the first is
something I didn’t really focus on. No matter why you’re here, you
have to get it done.

Bonus Interview Questions

JofA: Talk about your transition from serving as vice president
of finance and administration for the Greater Miami
Convention and Visitors Bureau to the business of sports.
What skills translated between those two industries?

Mariner: The convention and visitors
bureau was something of a turnaround situation, and so it
presented a huge challenge professionally. By the time I left it
was a very, very financially sound, stable, profitable operation.
Not just because of me, but I played a key role in getting us
there. When I interviewed with the Marlins for the very first
time, it was clear to me, as a startup operation, they needed and
could use a lot of the skills that I had developed.

In
doing the previous turnaround, I literally wrote the chart of
accounts and set up the accounting system and all the basic,
boring things—payroll systems and all that stuff—things that the
Marlins needed as a startup franchise. And I think they saw and I
clearly saw that they could have gotten a lot of big name CFOs,
but they need someone to get in there, roll up their sleeves and
get the financial department off the ground. And that was
something that I was able to bring to them.

Because the
CVB was a quasi-public entity—it was private but it received some
funding from the county government—the meetings were all public
and it was a very, very media-driven environment. So, that was
good training for being in the fishbowl world of professional
sports.

JofA: Is the business of sports a good career option for
finance professionals?

Mariner: The short answer is not
necessarily. I don’t want to discourage people from pursuing it.
And I say that for one key reason. It is not the high-finance
world that people may perceive it to be. It’s high-profile, not
high-finance. Day to day, at the team level especially, it is
closing the books each month, paying the bills, it’s doing the
budgets. It’s not rocket science, but the pace and the pressures
of a long season are intense.

So, if someone’s got this
huge, high-finance idea, don’t expect anything quite that
exciting. For the solid, hard-core accountants and those that are
coming out of the world of public accountancy, it’s a great
opportunity.

JofA: How much progress has been made on the goal of closing
the gap between rich teams and less rich teams?

Mariner: Overall, we have seen
significant movement in closing the gap. How much you spend is not
necessarily, anymore, the real bellwether to how well you’re going
to do. Last year Colorado and Arizona were two of the lower
spending clubs in terms of payroll that went further into the
playoffs than other clubs that spent substantially more.

So the gap is smaller but, more importantly, the way clubs
spend money given the tools—the luxury tax and debt-service rule
put in place with the 2002 collective bargaining agreement—really
put the brakes on the “Wow, let’s just spend, spend, spend”
mentality without regard to the financial consequences, in favor
of “Let’s spend more smartly.”

And so now small clubs have
a much better chance to compete on the field. Our catch phrase is
competitive balance. The Cubs and Indians are projected to make it
to the World Series this year. The Indians aren’t a big spending
club, and the Cubs have never been either.

The challenges of the new lease accounting standard have been pervasive to say the least. In this free, independently-written report, you'll learn effective adoption strategies as well as resources for easing the transition to the new standard.